PayPal kicks off RTR earnings season with a BANG!

Overall the market is slightly more optimistic than before. But don’t let that blind you from the reasons for our dose of caution. The rest of the story awaits you below.

Market Commentary

On the last webinar with Adam Mesh, 10/16, he joked that every week I write a “manifesto” on the market. And yes, that typically is the case.

But there is no manifesto to write this week.

Sure I could fake it. And just keep typing away to show you my writing prowess…but the stock market story is basically the same as we have discussed ad nauseum week after week.

• China trade negotiations are in a quiet period awaiting a possible meeting in mid November to “paper” the current deal.
• Earnings season is better than low expectations, but not overly impressive.
• Brexit continues to be a non-existent story as they never actually accomplish anything and keep moving the day of reckoning ever further into the future.
• Economic data is mixed…but doesn’t really matter that much because investors have intertwined this information with the China trade discussions. If a deal comes together, then the economy should bounce making past weak data irrelevant.

OK…maybe there is a little more to say on economic data (says the fundamental investor dying for something interesting to talk about 😉

Given the plummeting of the ISM Manufacturing report last month it is worthwhile watching what the leading indicators tell us going into the next ISM Manufacturing report on Friday November 1^st.

Gladly the latest indications on manufacturing are looking up with 2 of the 3 regional reports showing improvements in the headline #s (Empire State and Richmond). The one outlier was the Philly Fed report which declined from 12.0 to 5.6. But, under the surface, was a shockingly good 26.2 reading for New Orders which foretells of stronger readings ahead.

Net-net these 3 reports bode well for an improvement in the next ISM Manufacturing report. It may still be below 50…but it should be trending back in the right direction.

We will also be sure to see what the competing PMI Manufacturing report says that day as it is often the better indicator of trend. And last time it improved to 51.1 while ISM sank to scary depths.

On the price action front you likely have noticed the day to day dance above and below 3,000. So today’s burst at the finish to close above is nice on the surface. Unfortunately it has little meaning of what to expect tomorrow…or next week.

However, as long as news on the China trade front does not worsen…then we are more likely to be above 3,000 than below. Which is another reason why I was fine letting go of HDGE today with our portfolio slightly more aligned with the increasing odds of a dealing taking shape.

Sorry to those who were looking for a full fledged manifesto today. But let me assure you that I have shared with you all the investment news that is fit to print. As more market moving news arises, then I will happy to keep typing til my fingers are raw so you have what is needed to be successful.

Portfolio Update

For now I believe we are properly aligned with the risk and reward scenario that the market presents to us. That being a cautiously optimistic environment where it makes sense to have downside protection in case of trade war emergency. We can quickly add more downside protection in the future if conditions sour. Or ratchet up to a higher % long if the outlook continues to brighten.

Here are more specifics on our individual positions:

PayPal (PYPL): Did you start to wonder if something was wrong with PYPL as it broke under $100 coming into earnings? Heck, I did too. But I held firm with my belief that the company would continue to deliver the goods this afternoon when earnings were announced.

They crushed it on all levels!

Shares are up 7-9% after hours as I type. That’s because line after line of the earnings report sparkles with beat and raise exceptionalism. Sure 61 cents vs. 52 expected is nice. But next quarter is guided higher. Same for full year. And Venmo growth is at an incredible 64% clip.

In a nutshell the theme of today’s portfolio commentary is about the erratic and illogical movement of stocks in the short run. But in the long run, fundamentals rule. And if we stay focused on that we will get rewarded. PayPal is living proof!

No doubt there will be a stream of analyst activity in coming days. I will watch it closely and share the glorious details next week.

End of Free Preview

The rest of the commentary is reserved for subscribers to the Reitmeister Total Return portfolio. The topics covered include:

• Sector rotation at play where overall market barely moving while under the surface is great turnover in leaders and laggards. How should you trade that environment?
• What to expect the rest of earnings season.
• Updates on 6 of other the stock recommendations in the portfolio.
• And more.

To see the full portfolio (which is up nearly 1% on Thursday alone), the next trades, and read the rest of this commentary, just start a 30 day trial. Click the link below to learn more.

About the Reitmeister Total Return portfolio & 30 Day Trial

SPY shares were trading at $300.28 per share on Thursday morning, up $0.40 (+0.13%). Year-to-date, SPY has gained 21.83%, versus a 21.83% rise in the benchmark S&P 500 index during the same period.

About the Author: Steve Reitmeister

Steve is better known to the StockNews audience as “Reity”. Not only is he the CEO of the firm, but he also shares his 40 years of investment experience in the Reitmeister Total Return portfolio. Learn more about Reity’s background, along with links to his most recent articles and stock picks. More...

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